Class–12
MICRO-Economics
Notes – BY RAJ SIR
CHAPTER – 1 ST
INTRODUCTION
Study of Economics is divided into two branches:
(a) Micro economics
(b) Macro economics
Micro economics studies the behaviour of individual economic
units. Ex-Consumer equilibrium, producers equilibrium, product
pricing, factor pricing etc.
Micro economics is also called price theory.
Macroeconomics studies the behavior of the economy as a
whole. Ex- National income, aggregate demand, aggregate
supply, general price level, Inflation etc.
Macroeconomics is also called theory of income and
employment.
Economy is a system in which people earn a living to sastisfy
their wants through process of production, consumption,
investment and exchange.
, Economic problem is the problem of choice arising from use of
limited means which have the alternative use for the satisfaction
of various wants.
Cause of economic problems are :(a) Unlimited Human Wants(b)
Limited Economic Resources(c) Alternative uses of Resources.
Central Problems of an Economy
The central problem of “what to produce” refers to which goods
and services will be produced in an economy and in what
quantities.
An economy has to produce those goods and services where
there will be maximum social utility. This problem is studies
underprice theory.
The central problem of “how to produce” refers to what
technique of production (i.e.., labour intensive or capital
intensive) should be used to produce goods.
An economy has to select that technique which maximizes the
output at minimum cost. This problem is studies under theory of
production.
The central problem “for whom to produce” is related to
distribution of produced goods and services (i.e.., income and
MICRO-Economics
Notes – BY RAJ SIR
CHAPTER – 1 ST
INTRODUCTION
Study of Economics is divided into two branches:
(a) Micro economics
(b) Macro economics
Micro economics studies the behaviour of individual economic
units. Ex-Consumer equilibrium, producers equilibrium, product
pricing, factor pricing etc.
Micro economics is also called price theory.
Macroeconomics studies the behavior of the economy as a
whole. Ex- National income, aggregate demand, aggregate
supply, general price level, Inflation etc.
Macroeconomics is also called theory of income and
employment.
Economy is a system in which people earn a living to sastisfy
their wants through process of production, consumption,
investment and exchange.
, Economic problem is the problem of choice arising from use of
limited means which have the alternative use for the satisfaction
of various wants.
Cause of economic problems are :(a) Unlimited Human Wants(b)
Limited Economic Resources(c) Alternative uses of Resources.
Central Problems of an Economy
The central problem of “what to produce” refers to which goods
and services will be produced in an economy and in what
quantities.
An economy has to produce those goods and services where
there will be maximum social utility. This problem is studies
underprice theory.
The central problem of “how to produce” refers to what
technique of production (i.e.., labour intensive or capital
intensive) should be used to produce goods.
An economy has to select that technique which maximizes the
output at minimum cost. This problem is studies under theory of
production.
The central problem “for whom to produce” is related to
distribution of produced goods and services (i.e.., income and
